U.S. Supreme Court

Chemerinsky: SCOTUS gets another look at the Affordable Care Act

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Erwin Chemerinsky

Erwin Chemerinsky.

The Supreme Court will hear oral arguments March 4 in one of the most important cases of the term, King v. Burwell, which could determine the fate of the Patient Protection and Affordable Care Act. In National Federation of Independent Business v. Sebelius, decided in 2012, the Supreme Court upheld the constitutionality of the individual mandate in the Affordable Care Act over the dissent of four justices who would have declared the entire statute unconstitutional. By contrast, King v. Burwell, involves a statutory question, not a constitutional one, but it could be no less important to the future of this important federal legislation.

Prior to the Affordable Care Act, approximately 50 million Americans were without health care coverage. The goal of the law was to make sure that almost all Americans had some form of health insurance. For the poorest among us, the act required that states receiving Medicaid funds provide coverage to those within 133 percent of the federal poverty level. The federal government would pay 100 percent of these costs until 2019, and 90 percent thereafter. In National Federation of Independent Business v. Sebelius, the court declared this requirement for Medicaid coverage to be unconstitutional as unduly coercive on state governments.

For those above the poverty level but without adequate resources to buy insurance, the act creates tax credits. To facilitate the purchase of health insurance, the Affordable Care Act establishes health care “exchanges,” where individuals can purchase competitively priced coverage.

The act provides that “each state shall… establish an American Health Benefit Exchange.” Congress, though, cannot constitutionally compel states to enact laws. So the act also provides that if a state does not “elect” to create an exchange, the federal government “shall establish and operate such exchange within the state.”

To make health insurance affordable, the act provides a federal tax credit to low- and moderate-income Americans to offset the cost of insurance policies. The act provides the credit to individuals who enroll in a health plan “through an exchange established by the state under Section 1311.”

The problem, though, is that only 16 states have established exchanges. In the other 34 states, the exchanges are created by the federal government pursuant to the act. The IRS promulgated regulations making the tax credit available to qualifying individuals who purchase health insurance on both state-run and federally facilitated exchanges. The IRS rule says that credits shall be available to anyone “enrolled in one or more qualified health plans through an exchange.”

The issue before the Supreme Court is simply stated: “Does the Affordable Care Act authorize the IRS to provide tax credits to individuals who purchase health insurance on a federally facilitated exchange?”

The answer to this question is enormously important for the future of the Affordable Care Act and the availability of health insurance in the United States. As many as 8 million Americans are able to afford health care because of the tax credits provided. The implications, though, extend beyond these people. If they are not part of the health care exchanges, the risk pools change significantly.

A RAND Corporation study issued in January has estimated that costs of health insurance in the federally-created exchanges could increase by as much as 47 percent if these individuals no longer could participate because of the lack of tax credits. Many then would be priced out of being able to afford health insurance on the exchanges, which would further limit the risk pools and create a spiral that some believe would collapse these health insurance exchanges.

What is before the court is a question of statutory interpretation. The challengers focus on the language of the statute that says that a tax credit is available to those who purchase insurance “through an exchange established by the state.” They argue that an exchange created by the federal government is not one “established by the state.” The challengers contend that this actually may have been intentional in that Congress might have limited tax credits to those purchased on state created exchanges to give the states an incentive to establish them.

The United States, by contrast, argues that the text of the law supports allowing tax credits to those who purchase insurance on an exchange created by the federal government. It says “an exchange established by the state” in the context of the law clearly was meant to include both state-run and federally established exchanges. It argues that the phrase “such exchange” in the law means that a federally facilitated exchange stands in for a state-run exchange, and that therefore tax credits are available to purchasers on both.

The government argues that the act’s goal was to ensure that all Americans could have health insurance and that it would negate this objective to deny tax credits to those who purchase insurance on a federally created exchange. The United States argues that the availability of tax credits in every state is essential to the act’s purpose and success. Indeed, the United States points out that states without exchanges will suffer severe consequences if their citizens cannot get tax credits. The argument is that Congress should not be seen as having intended to put such a burden on the states without clearly having said so.

Both sides argue over whether deference is due to the Internal Revenue Service’s interpretation of the act. In the 1984 case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., the issue was raised of how courts should treat agency interpretations of statutes that mandated that agency to take some action. The Supreme Court held that courts should defer to agency interpretations of such statutes unless they are unreasonable. The government urges such Chevron deference, while the challengers claim that the plain language of the statute is clear and the agency’s interpretation is therefore irrelevant.

As a matter of law, the government has the clearly better argument. Time and again, the Supreme Court has held that in interpreting a statute, context should be taken into account. In National Association of Home Builders v Defenders of Wildlife, the court held in 2007 that “the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” In Robinson v. Shell Oil Company, the Supreme Court in 1997 said that in analyzing a statute courts must look to “the specific context in which that language is used, and the broader context of the statute as a whole.”

As Judge Andre Davis of the 4th U.S. Circuit Court of Appeals explained in his concurrence in the Affordable Care Act case: “No case stands for the proposition that literal readings should take place in a vacuum, acontextually, and untethered from other parts of the operative text; indeed, the case law indicates the opposite.”

To accept the challengers’ view, the Supreme Court would have to believe that the president and Congress wanted to include a provision in the act that would allow states that opposed the law to undermine, and perhaps even destroy, the exchanges that it required be created.

But the intense partisanship surrounding the Affordable Care Act makes it quite uncertain whether the court will follow this law. Every Republican in Congress voted against the Affordable Care Act. The House of Representatives has now voted more than 50 times to repeal the act. The courts have been no less partisan in their treatment of the law. Every lower federal court judge appointed by a Republican president, with two exceptions, voted to declare the individual mandate unconstitutional; every lower federal court judge appointed by a Democratic president, with one exception, voted to uphold it. Four justices on the Supreme Court–Antonin Scalia, Anthony M. Kennedy, Clarence Thomas, and Samuel A. Alito–would have declared the entire act unconstitutional in National Federation of Independent Business v. Sebelius.

I try hard to get my students to see how law directly affects people, often in the most intimate and important aspects of their lives. This case is about life and death in determining whether millions of people will still have health insurance and access to health care.

Erwin Chemerinsky, Dean and Distinguished Professor of Law, and Raymond Pryke Professor of First Amendment Law at the University of California, Irvine School of Law, is one of the nation’s top experts in constitutional law, federal practice, civil rights and civil liberties, and appellate litigation. He is the author of seven books, the latest being The Case Against the Supreme Court (Viking, 2014). His casebook, Constitutional Law, is one of the most widely read law textbooks in the country. Chemerinsky has also written nearly 200 law review articles in journals such as the Harvard Law Review, Michigan Law Review, Northwestern Law Review, University of Pennsylvania Law Review, Stanford Law Review and Yale Law Journal. He frequently argues appellate cases, including matters before the U.S. Supreme Court and the U.S. Court of Appeal, and regularly serves as a commentator on legal issues for national and local media. He holds a J.D. from Harvard Law School and a B.S. from Northwestern University.

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